Large Debts and Bad Credit Preventing More Americans from Buying Homes
Home prices are low, mortgage rates have hit rock bottom - and yet owning a home is more out of reach than ever for a growing number of Americans.
Why? Chalk it up to all that debt we carry.
Last year, the average credit card debt for a U.S. household was $7,194. However, if you only look at households that actually have debt, the number rises to more than $15,000, according to NerdWallet.
And of course, that doesn't take into account mortgage debt, student loan debt, car loans or medical bills. In all, Americans were $11.31 trillion in debt in 2012 - up 4.6 percent from 2011.
The more debt a person has, the more likely he or she will struggle to pay it, which could mean missed payments, exceeded credit card limits and debt defaults.
Not surprisingly, that kind of behavior has a negative impact on your credit score. When considering a loan, lenders evaluate a potential borrower's FICO credit score to assess risk.
Being deemed a high-risk borrower means higher interest rates and less favorable terms - if you can qualify for a loan at all, that is.
After the housing bust, lenders are understandably hesitant to make loans to anyone with a history of unpaid bills or subprime credit. Dealing with debt before you hunt for a home loan reassures banks that you're trustworthy.
Not only can cleaning up your finances before applying for a mortgage help with getting the loan, it will also help you pay that loan. Qualifying for a mortgage is only half the battle. If you want to keep your house, you might as well make sure you can actually afford to pay the bills.
If you have overwhelming debts that are interfering with your dreams of owning a home, bankruptcy can be the most effectual way to lower or eliminate them.
While many worry that bankruptcy will leave a black mark on their credit report, chances are their credit is already marred by their debts - for instance, negative credit card information stays on a credit report for seven years. But that doesn't mean you have to wait seven years to improve your financial life.
Once you reduce debt and start making timely payments, you'll be surprised at how quickly your credit - and good fortune - will rebound. Many of our bankruptcy clients are able to qualify for loans shortly after filing. And because filing for bankruptcy relieves the pressure of debt, it will be much easier to make payments on those loans.
You don't have to let debt drag you down. If your debts are letting opportunity pass you by - whether it's buying a home, getting a better job or taking your dream vacation - bankruptcy can help you take control of your finances and your future.
Find out what bankruptcy can do for you when you sign up for a free one-on-one debt analysis with an experienced DebtStoppers bankruptcy attorney. Call DebtStoppers at 800-440-7235 to schedule your debt evaluation today.
More Blog Entries:
American Household Credit Card Debt Statistics through 2012, by Tim, NerdWallet
Hiking Credit Score Before Buying A Home, by Steve Bucci, Bankrate.com